Cigna Wants Out Of Anthem Deal And $13B In Damages

Cignasaid Tuesday it wants to terminate its deal with health insurance giant
Anthem, demanding more than $13 billion in damages plus a previously disclosed breakup fee.

Cigna, which filed a lawsuit against Anthem in Delaware Chancery Court, said Anthem isn’t allowed to extend a termination date of its deal. Anthem last week said it would appeal a U.S. District Court ruling blocking its merger with Cigna.

Under terms of its merger agreement with Cigna, the insurer is already expecting a $1.85 billion breakup fee from Anthem that it plans to put toward capital to potentially find another merger.

“These additional damages include the amount of premium that Cigna shareholders did not realize as a result of the failed merger process,” Cigna said of the additional more than $13 billion in damages the Anthem merger process has caused the company. “This action is necessary to enforce and preserve Cigna’s rights and protect the interests of its shareholders.”

The lawsuit Tuesday comes on the same day executives from
Aetna and
Humana agreed to terminate their merger after a U.S. District Judge blocked the deal, saying it was anticompetitive and would lead to higher prices for consumers.

For its part, Anthem, which operates Blue Cross and Blue Shield plans in 14 states, said it disagreed with Cigna's allegations.

"On January 18, 2017, Anthem extended its merger agreement with Cigna through April 30, 2017," Anthem said in a statement Tuesday evening. "Under the terms of the merger agreement, Cigna does not have a right to terminate the agreement. Therefore, Cigna’s purported termination of the Merger Agreement is invalid. "

But if Cigna successfully extracts itself from Anthem's clutches, Cigna CEO David Cordani earlier this month said the company will have up to $14 billion in capital it could deploy this year for acquisitions.

"Our outlook for an attractive 2017 is further strengthened by our current capital position,” Cordani told analysts on Cigna's fourth-quarter earnings call earlier this month. “In total, depending on the mix of share repurchase, dividends and M&A, we would expect to have between $7 billion to $14 billion of deployable capital in 2017. It's important to emphasize here that we have a disciplined approach and a strong track record of deploying capital and avoid having surplus capital sit idle for any length of time.”

I've written about health care for three decades, starting from my native Iowa where I covered the presidential campaign bus rides of Bill and Hillary Clinton through the Hawkeye state talking health reform and the economy. I have covered the rise, fall and rise again of he...